Legal challenge to gender weighting by insurance firms

INSURANCE FIRMS will be forced to raise premiums or stop insuring certain groups of people altogether if Europe’s highest court…

INSURANCE FIRMS will be forced to raise premiums or stop insuring certain groups of people altogether if Europe’s highest court upholds a recommendation aimed at preventing insurers from calculating risk based on a person’s gender, an industry group has warned.

The Irish Insurance Federation issued the stark warning yesterday following publication of an opinion by European Court of Justice advocate general Juliane Kokott, which argues that it is “legally inappropriate” to link insurance risks to a person’s sex.

“I . . . am of the opinion that the use of actuarial factors based on sex is incompatible with the principle of equal treatment for men and women,” said Ms Kokott, in a 15-page opinion that could have far-reaching consequences for the motor and life insurance industries and the pension industry.

EU law prohibits insurers from taking a person’s sex into account when setting premiums. But there is an exception that allows states to permit differences in premiums where the use of sex is a determining factor in the assessment of risk based on “relevant and accurate actuarial and statistical data”.

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This enables insurers to charge different rates to men and women for many products. For example, a sample taken from three of the biggest insurance firms yesterday found young male drivers are being charged up to 83 per cent more for motor insurance than their female counterparts.

Insurance quotes received for 20-year-old male and female drivers for a Ford Focus 1.4L to Aviva, Quinn Direct and AXA show in all cases men are charged significantly more than women.

Women also pay less for life insurance than men because they live longer on average. Conversely, they must pay more into their pension funds to receive the same annuity as men for the same reason: they live longer than men.

Chief executive of the Irish Insurance Federation Martin Kemp said, in general, men pay higher motor insurance premiums than women, although the difference in charges reduces as men get older.

“I think the statistics show women tend to have a higher frequency of crashes but the severity of crashes involving men is worse,” said Mr Kemp.

Mr Kemp warned that if the opinion of the advocate general led to unisex rates for men and women, insurance companies would have to charge everyone more for their insurance policies.

“A unisex premium would not necessarily be an average premium between men and women. If you take away one of the factors used to determine risk it creates greater uncertainty and leads to slightly increased costs,” he said.

Mr Kemp said the current big difference in premiums charged to young male drivers when compared to young female drivers was not discrimination. He said companies differentiated between the risks using objective information.

He said there was a risk that a decision by the European Court of Justice to uphold the opinion would lead firms to stop offering insurance to young male drivers.

Advocate general’s opinions are followed in about 80 per cent of European Court of Justice cases, prompting the Irish Insurance Federation and the European Insurance and Reinsurance Federation to issue the stern warnings.